Roadblocks to growth

India is poised for a rapid economic growth - an 8 per cent GDP growth rate annually over the next two decades is now considered a settled matter. But there are major resource constraints to this growth story that economists talk about but have hardly taken into account in their growth projections.

The very first of these constraints is land. Protests, civic unrest and violence that have happened in the last few years over land acquisition for industrial and infrastructure projects have been widely reported in the mainstream media. The question is, how much land will be required (and hence, needs to be acquired) in the next two decades for industries, mines and infrastructure projects to convert the 8 per cent growth projection into reality.

Similarly, freshwater availability is an equally important constraint to growth. While it has not received much attention, it does have the potential to wreck the growth story.

On November 6, 2007, in one of the biggest protests in the last 60 years against water use by industries, farmers from eight districts in Orissa stormed the Hirakud dam, demanding water for irrigation that they had been promised, but weren’t getting because of increased allocation to industries.

In summer 2009, industries in Ujjain and Dewas in Madhya Pradesh stopped operations for weeks because there was no water to run factories. The situation in Dewas was so bad that prohibitory orders were imposed to keep people from damaging the pipeline from the Narmada river to the industrial units.

The above two incidents are symptomatic of the challenge of water management the country faces today. Let’s be clear, there is a growing conflict between industry and farmers, between cities and industries over water scarcity and water pollution and this conflict will increase because the demand for freshwater by industries will grow manifold in the coming decades.

The growth paradigm

The 8 per cent growth paradigm means that production in all sectors (our focus is the power sector and five major manufacturing sectors -- steel, cement, paper, fertilizer- urea only, and aluminium), will grow four-five fold. Steel production is likely to reach 300 million tonnes (MT) in 2030 compared to 60 MT today; production of cement will reach 900 MT compared to 190 MT in 2008-09, paper production will reach 28 MT and aluminium 6.5 MT in 2030. The power from utilities will rise to about 3,200 terawatt-hours (TWh) compared to 750 TWh today. Please bear in mind that the projected growth in 2030 in these sectors in India is of the same magnitude as what China produces today.

The mining sector will also grow to meet the mineral demand of these sectors. The estimated coal requirement in 2030 will be anywhere between 1.5-2.0 billion tonnes (depending on how much non-coal power plants we are able to install); limestone 700-800 MT; iron ore 400 MT and bauxite 35 MT. Essentially, mining of these minerals will have to increase three-four fold to meet the needs of the growing industry.

The water challenge

Freshwater withdrawal today by the steel, cement, aluminium, fertilizer, paper and power sectors is equivalent to the total domestic water demand of the country (around 42,000 million cubic meters per annum). Freshwater consumption (water that is lost through evaporation, products and wastes in industries) equals the total drinking and cooking water needs of India (5,600 million cubic meters per annum). The difference between freshwater withdrawal and consumption is the wastewater discharged by industries, which pollutes our rivers, lakes and groundwater. The power sector today alone accounts for over 80 per cent of all industrial water use in the country.

India's 8 per cent growth trajectory means that by 2030, freshwater withdrawal by these six sectors will increase by 40 per cent and freshwater consumption by more than three-fold. The change in cooling systems in thermal power plants, from once-through cooling system to cooling towers, is the single most important reason why freshwater withdrawal will grow at a lower rate than freshwater consumption.

The problem will be the three-fold increase in consumption, which essentially means less freshwater will be available downstream for other users. There is already a growing conflict between industry and local communities on water sharing in many parts of the country; the three-fold increase in consumption will exacerbate it.

The land anomie

Currently, around 0.7 million hectares (ha) of land is occupied by these six sectors -- 0.4 million ha to mine coal, iron ore, limestone and bauxite, and 0.3 million ha for the plants. In an 8 per cent growth trajectory, an additional 1.0-1.3 million ha of land will be required by these six sectors – which means the amount of land needed by these six sectors in the next 20 years will be far higher than what they have acquired in last 60 years.

About 1,85,000 ha of additional land will have to be leased to mine coal, to meet the demand for coal from the six sectors by 2030-31. This is 50,000 ha more than all the coal mine leases granted in the country so far. Iron ore mining will require an additional 56,000 ha land; limestone mining 61,000 ha and bauxite mining 28,000 ha.

It is important to understand that India has an adverse land-population ratio (the per capita land availability is a mere 0.25 ha). This is compounded by the fact that India’s remaining mineral deposits, especially coal, iron ore and bauxite, exist largely in areas that are characterized by large forest covers, big tribal populations, extreme poverty and naxal unrest. Acquiring land, therefore, will not be easy unless policies change or ways of ‘inclusiveness’ are devised in which local communities benefit proportionally.

India has always faced what may be called ‘the challenge of the balance’: just growth, or growth that is ‘just’ to the people and the environment. The industrial growth that we will witness in the next two decades will intensify this ‘challenge’ and force us to reinvent the growth paradigms.